Moving to Central-Eastern Europe: Fragmentation of Production and Competitiveness of the European Textile and Apparel Industry

Abstract

International fragmentation of production towards some low labor-cost countries is the strategy followed by industrialized countries to counter the growing competitive pressures from other low labor-cost countries. Using custom data on Outward Processing Trade by EU textile and apparel firms we estimate the cost saving associated with Outward Processing in the Central and Eastern European countries relative to a counterfactual scenario in which firms do not take advantage of such practice. The process will continue at an increasing pace, it possibly being, along with product-quality upgrading, the only way for the EU apparel industry to stay competitive on world markets.